THE PROVINCIAL EMPLOYEES’ SOCIAL SECURITY

ORDINANCE, 1965

Momil Fatima
Muhammad Bilal Tariq
Sundus Mazhar
Wasay Ashraf

Business Law
Section O
16th April, 2018
 History and Purpose
The Social Security Scheme was launched on 1st March, 1967, under West Pakistan Employees

Act, with the assistance of the International Labour Organization.

When It Was Promulgated and What Are the Subsequent

Amendments?
The Provincial Assembly of the Punjab was not in session and Governor of the Punjab

was satisfied that the circumstances existed which render it necessary to take immediate

action. Therefore, in exercise of powers conferred under clause of Article 128 of the

Constitution of the Islamic Republic of Pakistan, Governor of the Punjab made and promulgate

the following Ordinance. They came into force at once.

1. Amendment in section 1 of Ordinance X of 1965.– (1) In the Provincial

Employees’ Social Security Ordinance, 1965 (X of 1965), hereinafter referred to as the said

Ordinance, in section 1,in subsection (2), for the word “Pakistan”, the words “the

Punjab” shall be substituted.

2. Amendment in section 2 of Ordinance X of 1965.–In the said Ordinance, in

section 2:
 (a) inclause (8), forsub-clause (f), the following shall be substituted:

“(f) any person employed on wages exceeding the wages

determined by the Government under section 71;”;

(b) forclause (14),the following shall be substituted:

“(14) “Government” means Government of the Punjab;”; and

(c) in clause (25a), for the words “three hundred and sixty rupees”, the words

“six percent of the wage limits determined by the Government under section

71” shall be substituted.

3. Amendment in section15 of Ordinance X of 1965.– In the said Ordinance, in

section 15, for the word “Government”, the words “the Institution” shall be substituted.

4. Amendment in section 20 of Ordinance X of 1965.– In the said Ordinance, in section

20, in subsection (1):

(a) for the words “at such rate not more than six percent”, the words “at the rate of

six percent” shall be substituted; and

(b) in the proviso, for the words “four hundred rupees per day or ten thousands

rupees per month”, the expression “the wages determined by the

Government under section 71” shall be substituted.

5. Amendment in section 20A of Ordinance X of 1965.–In the said Ordinance, in section

20A:

(a) in subsection (1),for the words “three hundred and sixty rupees”, the words

“six percent of the wage limits determined by the Government under section

71” shall be substituted; and

(b) in subsection (3), for the word “twenty”, the word “forty” shall be substituted.

6. Amendment in section 37 of Ordinance X of 1965.–In the said Ordinance, in

section 37, for subsection (1), the following shall be substituted:

“(1) On the death of a secured person receiving or entitled to receive

injury or sickness benefit, or medical care at the time of his death, the

surviving widow, widows or needy widower, or if there is no surviving widow,

widows or needy widower, the person who provided for the funeral,

shall,subject to regulations,be entitled to such death grant as may be

provided in the regulations.”

7. Amendment in section 42 of Ordinance X of 1965.–In the said Ordinance, in

section 42, after subsection (2-A), the following subsection (2-B) shall be inserted:

“(2-B) Where only father or mother is entitled to the survivor’s pension and the

recipient dies leaving behind the other parent, such surviving parent shall
 be entitled to the survivor’s pension equal to the amountbeing received by

theother parent at the time of the death of that parent subject to the

condition that the surviving parent is the real father or mother of the

deceased secured worker.”

8. Addition of section 47-A in Ordinance X of 1965.–After section 47, the following

section 47-A shall be inserted:

“47-A. Establishment of medical and other institutions.–The Institution

may, through the public-private partnership mode, establish medical, dental,

nursing, allied health or training institutionsand, for the purpose, incur

expenditure from the Fund.”

9. Amendment in section 54-A of Ordinance X of 1965.–In the said Ordinance, in section

54-A, for the words “two hundred rupees per day or five thousand rupees per month”,

the words “the wages determined by the Government under section 71 of the

Ordinance” shall be substituted.

10. Amendment in section 62 of Ordinance X of 1965.–In the said Ordinance, in

section 62, insubsection (5), for the word “fifty”, the words “five thousand” shall be

substituted.
 11. Amendment in section 66 of Ordinance X of 1965.– In the said Ordinance, in section

66, for the words “not exceeding one thousand rupees”, the words “up to ten thousand

rupees but not less than two thousand rupees” shall be substituted.

12. Amendment in section 70 of Ordinance X of 1965.– In the said Ordinance, in section

70, in subsection (2), for the words “one hundred and twenty rupees per day or three thousand

rupees per month“, the words “thewages determined by the Government under section 71 of

the Ordinance” shall be substituted.

13. Amendment in section 71 of Ordinance X of 1965.– In the said Ordinance, in section

71, the words, brackets and figures “specified in clause (f) of subsection (8) of section 2”,

wherever occur, shall be omitted.

14. Savings.–Notwithstanding anything contained in the Provincial Employees’ Social

Security Ordinance, 1965 (X of 1965), any contribution received or benefits released or

purported to have been received or released under the said Ordinance immediately before

the commencement of this Ordinance shall be deemed to have been validly received or

released under the

 Economic Regime that “Social Security” aims to enforce

Social Security have been formed within a framework consisting of nine major principles. It

is universal; an earned right; wage related; contributory and self-financed; redistributive;

not means tested; wage indexed; inflation protected; and compulsory.

As with any framework, the stability of the entire structure depends on the contribution made by

each part, so it is useful to review these principles and see how they work together.

1. Universal: This principle is aimed to ensure that each and every person who is an

employee is to be reached out in order for them to benefit from the social security.

2. Earned right: Social Security is more than a statutory right; it is an earned right, with

eligibility for benefits and the benefit rate based on an individual's past earnings. This principle

sharply distinguishes Social Security from welfare and links the program appropriately, to other

earned rights such as wages, fringe benefits, and private pensions.

3. Wage related: Social Security benefits are related to earnings, thus reinforcing the concept

of benefits as an earned rights and recognizing that there is a relationship between one's standard

of living while working and the benefits level needed to achieve income security in retirement.

Under Social Security, higher-paid earners get higher benefits, but the lower-paid get more for

what they pay in.

4. Contributory and self-financed: The fact that workers pay contributions from their wages

into the system also reinforces the concept of an earned right and gives contributors a moral

claim on future benefits above and beyond statutory obligations. And, unlike many foreign plans,
Social Security is entirely financed by dedicated taxes, principally those deducted from workers'

earnings matched by employers, with the self-employed paying comparable amounts. T

The self-financing approach has several advantages. It helps protect the program against

having to compete against other programs in the annual general federal budget—which is

appropriate, because this is a uniquely long-term program. It imposes fiscal discipline, because

the total income for Social Security must be sufficient to cover the entire cost of the program.

And it guards against excessive liberalization: contributors oppose major benefit cuts because the

have a right to benefits and are paying for them, but they also oppose excessive increases in

benefits because they understand that every increase must be paid for by increased contributions.

Thus a semi-automatic balance is achieved between wanting more protection versus not wanting

to pay more for it.

5. Redistributive: One of Social Security's most important goals is to pay at least a

minimally adequate benefit to workers who are regularly covered and contributing, regardless of

how low-paid they may be. This is accomplished through a redistributional formula that pays

comparatively higher benefits to lower-paid earners. The formula makes good sense. If the

system paid back to low-wage workers only the benefit that they could be expected to pay for

from their own wages, millions of retirees would end up impoverished and on welfare even

though they had been paying into Social Security throughout their working lives. This would

make the years of contributing to Social Security worse than pointless, since the earnings paid

into Social Security would have reduced the income available for other needs throughout their

working years without providing in retirement any income greater than what would be available

from welfare. The redistributional formula solves this dilemma.

 6. Not means tested: In contrast to welfare, eligibility for Social Security is not determined

by the beneficiary's current income and assets, nor is the amount of the benefit. This is a key

principle. It is the absence of a means test that makes it possible for people to add to their savings

and to establish private pension plans, secure in the knowledge that they will not then be

penalized by having their Social Security benefits cut back as a result of having arranged for

additional retirement income. The absence of a means test makes it possible for Social Security

to provide a stable role in anchoring a multi-tier retirement system in which private pensions and

personal savings can be built on top of Social Security's basic, defined protection.

7. Wage indexed: Social Security is portable, following the worker from job to job, and the

protection provided before retirement increases as wages rise in general. Benefits at the time of

initial receipt are brought up to date with current wage levels, reflecting improvements in

productivity and thus in the general standard of living. Without this principle, Social Security

would soon provide benefits that did not reflect previously attained living standards.

8. Inflation protected: Once they begin, Social Security benefits are protected against

inflation by periodic cost-of living adjustments (COLAs) linked to the Consumer Price Index.

Inflation protection is one of Social Security's greatest strengths, and one that distinguishes it

from other (except federal) retirement plans. No private pension plan provides guaranteed

protection against inflation, and inflation protection under state and local plans, where it exists at

all, is capped. Without COLAs, the real value of Social Security benefits would steadily erode

over time, as is the case with unadjusted private pension benefits. Although a provision for

automatic adjustment was not part of the original legislation, the importance of protecting

benefits against inflation was recognized, and over the years the system was financed to allow
for periodic adjustments to bring benefits up to date. But this updating was done only after a lag.

Provision for automatic adjustment was added in 1972.

9. Compulsory: Social Security compels all of us to contribute to our own future security. A

voluntary system simply wouldn't work. Some of us would save scrupulously, some would save

sporadically, and some would postpone the day of reckoning forever, leaving the community as a

whole to pay through a much less desirable safety-net system. With a compulsory program, the

problem of adverse selection—individuals deciding when and to what extent they want to

participate, depending on whether their individual circumstances seem favorable—is avoided (as

is the problem of obtaining adequate funding for a large safety-net program serving a

constituency with limited political influence).

MAIN SECTIONS

Section 1 Clause 3

Who does it apply to?

It shall come into force at once, but shall apply only to such areas, classes of persons,

industries or establishments, from such date or dates, and with regard to the provision of such

benefits as Government may, by notification, specify in this behalf.

Section 2

Defines the terms used in the Act

Examples:

“employee” means any person employed, whether directly or through any other person

for wages or otherwise to do any skilled or unskilled, supervisory, clerical, manual or other work

in, or in connection with the affairs of an industry or establishment, under a contract of service or

apprenticeship, whether written or oral, expressed or implied but does not include–

(a) persons in the service of the State, including members of the Armed Forces, Police Force and

Railway servants;

(b) persons employed in any undertaking under the control of any Defence Organization or

Railway Administration;

(c) persons in the service of a local council, a municipal committee, a cantonment board or any

other local authority;

(d) any person in the service of his father, mother, wife, son or daughter, or of her husband;

(f) any person employed on wages exceeding ten thousand rupees per mensem

Clause 25

“Secured person” means a person in respect of whom contributions are or were

payable under this Ordinance;

Section 3

Establishes and incorporates a new institution to be called the “Employees Social Security

Institution”.

Section 4-19

Provides for various matters related to the institution for example:

 Management of the Institution

 The Governing Body

 Powers and Functions of the Governing Body

 Meetings of The Governing Body

 Authentication of The Governing Body’s Orders

 Supersessions

 Fees and Allowances

 Resignation by the members

 Disqualifications from membership

 Filling of Vacancies

 Location of Head Office

 Appointment of Medical Advisor

 Appointment of Medical Practitioners and Medical Boards

 Commissioner and Vice-commissioner of the Institution

 Officers and Staff

Section 20 – 27

Section 20

Clause 1

Every employer, in respect of every employee, whether:

 Employed by him directly;

 Through any other person;

Pay to the institution a contribution

Clauses 1-9 provide various conditions in relation to these contributions.

Section 20A provides for a self-assessment scheme for employers to opt for.

Section 21 obliges to keep records and returns in relation to employees.

Section 22 Provides officials of the institutions the power to insure compliance with the

ordinance and grants them powers to that end

Section 23 Provides for increase of unpaid contributions if any employer fails to pay on time.

Also provides for recovery of such unpaid contributions as arrears of land revenue.

Section 24 safeguards right of secured person in the event of default in payment of contributions

by the employer.

Section 25 provides for return of contributions paid erroneously.

Section 26 allows for increase of rate of contribution where employer fails to observe rules of

safety or hygiene prescribed by law.

Section 28 to 34

Section 28 Provisions providing for set-up of Employee Social Security Fund in which all of the

contributions (and other monies) is deposited.

Section 30 to 34 Talks about budgets, accounts and audits, annual reports, etc.

Section 35 to 55A

Provides for various benefits to secured persons including:

 Sickness benefit (Section 35)

 Maternity benefit (Section 36)

 Death grant (Section 37)

 Medical care during Sickness and Maternity (Section 38)

 Medical care of Dependents (Section 38A)

 Injury Benefits (Section 39)

 Disablement pension (Section 40)

 Disablement gratuity (Section 41)

 Survivors pension (Section 42)

  In case of death while in receipt of Injury benefit or total disablement pension (Section

43)

 Section 45 to 54 provides for manner and extent of various benefits provided above and

other miscellaneous matters.

 Section 55A obliges employer of a domestic servant to provide at his cost medical care to

domestic servant.

Section 56 to 65

Section 56 provides for assessment of degree of disablement by medical board or medical

petitioner.

Section 57 provides that the institution shall decide all complaints, questions and disputes

Section 58 provides the institution the power to review its decision on account of new facts.

Section 59 provides for the appeal to a Social Security Court

Sections 60 to 64 provide for the constitution, jurisdiction and the powers of the social security

courts; appearance in proceedings before such court by legal practitioners; appeal from decision

of the court and stay of payment pending such appeals.

Sections 66 and 67

Provide for offences in relation to the matters governed by the act and the prosecution .

Section 68 to 82

Section 68 provides that the contributions payable under this ordinance are to have priority over

other debts in case of insolvency/winding up.

Section 70 provides for levy of a special tax in case of certain types of products/services

Section 71 obliges the Governing Body to annually review and modify wage limits and the

various rates of contributions and benefits under the ordinance.

Section 72 Protects employees from dismissal/punishment during period of sickness, etc.

Section 73 bars persons entitles to benefits provided by ordinance from receiving similar

benefits under any law

Section 74 bars jurisdiction of civil courts in respect of suits per damages.

Section 75 provides that all members of the Governing Body or Staff of the instituition shall be

public servants

Section 77 allows the governing body to delegate its powers and functions to the commissioner

or sub-ordinate officers of the institution

Section 78 validates defective acts and proceedings of the governing body

Section 79 allocates to the Government the power to make rules to carry out the purposes of

ordinance

Section 80 allocates to the governing body the power to make regulations

Section 81 provides that the benefits provided under this ordinance are to supersede certain

benefits payable under other laws.